In re Petition for Disciplinary Action against John F. Bonner, III, a Minnesota Attorney, Registration No. 0009726
Jurisdiction Office of Appellate Courts
M. Humiston, Director, Cassie Hanson, Assistant Director,
Office of Lawyers Professional Responsibility, Saint Paul,
Minnesota, for petitioner.
Hopeman, Lauren M. Krueger, Felhaber Larson, Minneapolis,
Minnesota, for respondent attorney.
referee did not clearly err by concluding that the Director
of the Office of Lawyers Professional Responsibility failed
to prove the allegations in Count II of the petition.
referee clearly erred in his findings on several mitigating
Given the mitigating factors present, the appropriate
discipline for respondent's conviction of felony theft by
swindle is an indefinite suspension with no right to petition
for reinstatement for 9 months.
Director of the Office of Lawyers Professional Responsibility
(Director) filed a petition for disciplinary action against
John F. Bonner, III, alleging that while acting as principal
owner of a law firm, Bonner failed to remit withheld employee
contributions into employees' retirement accounts and
instead used the funds to pay both his law firm's and his
own expenses. Count I of the petition involved conduct for
which Bonner was convicted of felony theft by swindle. Count
II involved similar conduct to Count I but was not covered by
the time frame underlying the conviction. We appointed a
referee, who found that, although Bonner's conduct in
Count I violated Minn. R. Prof. Conduct 8.4(b) and 8.4(c),
with respect to Count II, the Director had failed to prove by
clear and convincing evidence that Bonner violated Minn. R.
Prof. Conduct 8.4(c). The referee also found one aggravating
factor and several mitigating factors. The referee
recommended a 90-day suspension.
Director challenges the referee's findings, and both
parties challenge the referee's recommended discipline.
We hold that the referee did not clearly err by concluding
that the Director failed to prove the allegations in Count II
of the petition. We further hold that the referee clearly
erred in his findings on several mitigating factors. We
conclude that, given the mitigating factors present, the
appropriate discipline for respondent's conviction of
felony theft by swindle is an indefinite suspension with no
right to petition for reinstatement for 9 months.
was admitted to practice law in Minnesota on October 5, 1973.
In 1998, Bonner founded the law firm of Bonner & Borhart,
LLP (firm). From the firm's inception, Bonner held more
than a majority ownership interest. Between 2009 and 2014,
the period of time at issue in this case, five attorneys
worked at the firm, along with other support staff. As the
principal owner and managing partner, Bonner was responsible
for paying the firm's bills and expenses.
2000, the firm established a SIMPLE IRA Plan (Plan) to
provide retirement benefits to employees. Bonner was the
fiduciary of the Plan and was responsible for depositing the
withheld employee retirement contributions into the Plan.
Plan worked in the following manner. The firm hired one
outside vendor that processed payroll and managed the
employee-contribution paperwork. With this paperwork, an
employee designated how much to contribute to an individual
retirement account (IRA). Each pay period, the amount elected
was deducted from the employee's pay check. Each month, a
second outside vendor prepared and sent checks to Bonner for
the amount the employee had designated. After Bonner signed
the checks, they were sent to the company that managed the
Plan, which deposited the funds into the appropriate
employee's IRA. Between 2000 and 2008, Bonner remitted
withheld employee contributions on time and in
result of the 2007-08 recession, the firm began experiencing
financial problems in 2009. Bonner began prioritizing
expenses because the firm lacked sufficient funds to pay all
of its operating expenses on a monthly basis. Bonner put
staff salaries at the top of the priority list, followed by
medical insurance, attorney salaries, rent, and finally other
vendors and IRA payments.
Bonner stopped depositing the withheld employee contributions
into the Plan on a regular basis in 2009, he made sporadic
payments to the Plan in March, April, May, and July 2010.
Bonner caught up on all missing payments in November 2010.
Although he was late on payments thereafter, he made payments
in 2012, 2013, and 2014.Between January 15, 2009, and May 12,
2014, Bonner failed to timely deposit $133, 127.53
in withheld employee contributions into their IRA accounts
and never deposited $23, 334.63 in withheld employee
contributions into those accounts.
testified that he was unaware that the employee contributions
to the IRA plan were made with funds withheld from employee
salaries; rather, he believed that the firm was making these
contributions with firm profits. Bonner agreed that the form
for setting up the Plan explained the use of employee
contributions, but he testified that he likely did not read
it. Bonner contends that it was not until the United States
Department of Labor (DOL) began an investigation in September
2012 that he learned that the employee contributions were
made with funds withheld from employee salaries.
also testified that employees knew about the firm's
financial condition and that their retirement contributions
were not being deposited into their IRAs, even though the
contributions continued to be deducted from their paychecks.
Bonner and one of the firm's attorneys testified that the
firm kept open books for attorneys to review. The attorney
also said that he knew that his employee contributions were
not being deposited into his IRA account, despite the ongoing
deduction from his monthly salary. In fact, the attorney had
conversations with all of the attorneys at the firm about the
firm's failure to make deposits into their IRA accounts.
In addition, one partner and one member of the support staff
stopped contributing to their IRAs because they knew their
payments were not being deposited.
August 2009, the firm took out a revolving line of credit at
Landmark Bank that Bonner personally guaranteed. In December
2012, the firm took out another loan, also personally
guaranteed by Bonner, to pay off the Landmark credit line.
Between 2009 and 2014, Bonner paid the staff salaries in full
and on time despite other firm bills going unpaid. During
this period, Bonner did not take a salary, but he did take
draws from the firm to cover his cost-of-living and
court-ordered expenses. Bonner also contributed personal funds
to the firm totaling $295, 000.
summer 2011, Bonner and three attorneys of the firm met to
discuss eliminating the Plan in light of the firm's
finances, but Bonner was adamant that the Plan continue
unchanged because employees and attorneys depended on this
benefit. Bonner testified that he believed the firm would
catch up on the missed payments.
31, 2014, Bonner was charged in Hennepin County District
Court with felony theft by swindle, Minn. Stat. §
609.52, subd. 2(a)(4) (2016), for his failure to deposit $6,
068.08 in withheld employee contributions into the IRA
accounts of two firm attorneys from August 23, 2011, to
January 31, 2012. The evidence at trial proved that Bonner
kept withheld employee contributions in the firm's
business account, which was used to pay the firm's
business expenses and some of Bonner's personal expenses.
attorneys also testified at trial. The first testified that
he was aware that his employee contributions were not being
deposited and that Bonner failed to make a catch-up payment
in 2011, despite promising to do so. The other attorney
provided inconsistent testimony regarding her knowledge about
whether the employee contributions were being deposited into
her IRA account.
was convicted of felony theft by swindle on January 2, 2015.
As part of his sentence, Bonner was required to make full
restitution and pay a fine of $6, 000. Bonner was also placed
on probation for 3 years, which was originally set to end in
March 2018. The district court discharged him from probation
early, effective January 27, 2017.
January 8, 2015, the DOL filed a civil complaint against
Bonner, alleging that from January 15, 2009, through May 12,
2014, Bonner failed to timely deposit $133, 127.53
in withheld employee contributions into the Plan and
never deposited $23, 334.63 (which included the $6,
068.08 that was the subject of the criminal
case). Bonner made all required payments to the
appropriate IRA accounts by April 15, 2016, and paid an
additional $9, 658.98 to those employees' accounts to
compensate for lost opportunity costs. Bonner and the DOL
entered into a consent order and judgment dismissing the case
on May 5, 2016.
January 14, 2015, the Director began investigating Bonner as
a result of his felony conviction and the DOL lawsuit. The
November 6, 2015 petition for disciplinary action alleged
that Bonner's conduct that resulted in his felony
conviction violated Minn. R. Prof. Conduct 8.4(b)
(prohibiting criminal acts that reflect adversely on the
lawyer's honesty, trustworthiness, or fitness as a
lawyer) and 8.4(c) (prohibiting conduct involving dishonesty,
fraud, deceit, or misrepresentation) (Count I), and that
Bonner's failure to deposit withheld employee
contributions between January 15, 2009, to May 12, 2014,
violated Minn. R. Prof. Conduct 8.4(c) (Count II).
response, Bonner admitted that he failed to deposit withheld
employee contributions into the Plan. Bonner stated that
during the relevant time, there often was a shortage of funds
in the firm's business account to pay the firm's
overhead expenses and that it was during those times that
withheld employee contributions were not deposited or were
deposited in an untimely fashion. Bonner also asserted
several mitigating factors.
hearing before the referee, two attorneys testified to
Bonner's good character and reputation. An attorney
formerly employed by the firm, one of the victims of the
conduct underlying Bonner's criminal conviction, also
testified to Bonner's trustworthiness and competency and
said that Bonner never lied to him or told him that the IRA
payments were being deposited when they were not.
the hearing, the referee issued findings of fact, conclusions
of law, and a recommendation for discipline. With respect to
Count I, the referee found that Bonner's conviction for
felony theft by swindle violated Minn. R. Prof. Conduct
8.4(b) and 8.4(c) but that with respect to Count II the
Director failed to prove by clear and convincing evidence
that Bonner violated Minn. R. Prof. Conduct
8.4(c). The referee recommended that Count II be
dismissed and that Bonner receive a 90-day suspension for the
misconduct proven in Count I.
are provided a transcript of attorney discipline proceedings,
"the referee's findings of fact and conclusions of
law are not binding." In re Glasser, 831 N.W.2d
644, 646 (Minn. 2013); see also Rule 14(e), Rules on
Lawyers Professional Responsibility (RLPR) ("If either
the respondent or the Director so orders a transcript, then
none of the findings of fact or conclusions shall be
conclusive, and either party may challenge any findings of
fact or conclusions."). But we give great deference to a
referee's findings and will not reverse the referee when
the findings have evidentiary support in the record and are
not clearly erroneous. In re Aitken, 787 N.W.2d 152,
158 (Minn. 2010). "A referee's findings are clearly
erroneous when they leave us 'with the definite and firm
conviction that a mistake has been made.' "
Glasser, 831 N.W.2d at 646 (quoting In re
Albrecht, 779 N.W.2d 530, 535 (Minn. 2010)).
Director contends that the referee clearly erred by
concluding that she failed to prove that Bonner violated
Minn. R. Prof. Conduct 8.4(c) as alleged in Count II of the
petition. Rule 8.4(c) provides: "It is professional
misconduct for a lawyer to . . . engage in conduct involving
dishonesty, fraud, deceit, or misrepresentation."
Id. The Director bears the burden of proving by
clear and convincing evidence that an attorney has violated
the Minnesota Rules of Professional Conduct. In re
Varriano, 755 N.W.2d 282, 288 (Minn. 2008). This
standard "requires a high probability that the facts are
true." In re Lyons, 780 N.W.2d 629, 635 (Minn.
2010). The Director must, in other words, prove the